Employer Plans

Which plan is best for your company?

Small business owners have a number of retirement plan options to choose from. At Saturna, we believe SEP-IRA, SIMPLE-IRA, and 401(k) Plans offer employers great "Value for Your Money" because of their low cost and easy operation.

The plans have a few major distinctions:

The SEP-IRA is funded by employer contributions only, and is the simplest plan to implement. The business contributes the same percentage of compensation for all eligible employees.

The SIMPLE-IRA is funded by employee elective salary deferrals and flexible employer contributions. Employees have an opportunity to defer part of their salary to fund their retirement plans on a tax-advantaged basis.

In determining which of these retirement plans is most appropriate for your business, you'll want to consider a few key questions, including:

How much, if any, responsibility do you want the business to have for contributing to employee retirement plans?

What percentage of compensation do you want employees to be able to contribute each year?

Do you want to require the business to contribute to the plan on behalf of employees?

Do you want employer contributions to be subject to a vesting schedule?

To help you compare the answers to these questions for all your plan options, we have developed the following chart. Review it to see which plan combines the features that may be most appropriate for your business.

Funded by salary deferral and employer contributions, if elected under the plan; employer profit sharing

Contribution Flexibility

Contributions are discretionary

Employer contributions are mandatory

Employer matching contributions, if elected under the plan, are mandatory; profit-sharing contributions are discretionary

Maximum Annual Contribution Per Employee

Employer:
The lesser of $55,000 for 2018, and $56,000 for 2019, or 25% of annual compensation (25% of self-employed income)

Employee:
The lesser of $12,500 for 2018, and $13,000 for 2019, or 100% of compensation (plus catch-ups)

Employer:
Either match employee contributions dollar for dollar up to 3% of compensation (maximum $12,500 for the 2018 plan year, and $13,000 for the 2019 plan year); can be reduced to as low as 1% in any 2 out of 5 yrs
or
contribute 2% of each eligible employee's compensation, up to $5,500 for 2018, and $6,000 for 2019

Employee:
The lesser of $18,500 for 2018, and $19,000 for 2019 or 100% of compensation (plus catch-ups)

Employer:
May be set by plan

Overall maximum contribution (from all sources) is 100% of compensation, not to exceed $55,000 for 2018, and $56,000 for 2019 (plus catch-ups)

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